There are three primary investment areas we look to invest in. A portfolio may comprise of one or more investment areas. Whether an area is invested in at any given time is entirely dependent on the availability of suitable investments. In the absence of acceptable investments cash will be the default investment and portfolios may move back/forth to cash as required.
Value (Core) Investments
- Selection driven by both Macro-economic (‘big picture’ trends) and Micro (company specific) factors
- These investments typically display:
- Strong return characteristics (earnings growth and/or dividends)
- Strong fundamental numbers with clear earnings drivers
- Leverage to underlying Macro-economic themes
- Positions generally maintained until themes play out, their value diminishes or underlying investment environment alters
- Because of strong investment conviction, positions are generally less hedged and allowed more lee-way
Fair-Value (Non-Core) Investments
- Investments which display solid underlying business models but which are considered within a ‘fair-value’ band.
- These investments are utilised to generate active return and extract value over shorter to medium term time frames.
- Multiple strategies and tools (for example, derivatives) often used in combination
- Capital allocation and stop losses maintained with acceptable level of lee-way to give acceptable risk/reward payoffs
- Investments which match a particular angle or investment idea
- Can be on a stock, sector or index
- Can be a positive (long) or negative (short) view
- Held for varying time frames with strong risk control around:
- Capital allocation (generally smaller weightings)
- Stop Losses (rigid and tighter stop loss controls)
- These investments are generally of a higher risk nature, but have risk control mechanisms around them and offer acceptable upside/downside payoffs.